British-based property group Liberty International, which has a 50% South African shareholding, says it has enough UK retail developments tokeep it busy for a good deal of the next 10 years.
During a visit by investment analysts and journalists to Liberty International's property sites last week, management indicated it had a "strong pipeline"of developments to work on over the years. About 80% of Liberty International'sportfolio consists of large shopping centres.
One of the group's planned developments is the Chapelfield retail centre in Norwich. It is also working on the addition to the Red Mall, part ofits Metrocentre mall in Newcastle.
Liberty International is busy with the planning of the redevelopment of the St Davids Centre mall in Cardiff, Wales and the Westgate mall inOxford.
These developments will affect the group's bottom line positively. Liberty International CE David Fischel says expected annualised income streamsfrom Red Mall will be £25m over the next couple of years.
The group remains upbeat about its prospects despite fear of retail sales being affected by a possible UK residential property market crashand the effect of rising interest rates.
Fischel says Liberty International's experience is that completed quality shopping centres with establishment tenants can weather difficult times.
Financial director Aidan Smith says that retailers pay the company rent so in the long term it is exposed to the fortunes of the consumer, butin the short term it is insulated from the negative effects of higher interestrates.
"Our experience from the past is that even if times do get tough for retailers, they want to maintain their presence in stronger locations,and they will withdraw from weaker, less profitable locations. Liberty International maintains its presence in dominant super regional shoppingcentres, and that is where over the course of time top retailers want toremain a presence."
Although the development market may be affected by a hike in interest rates, Smith says the group has protected itself from any resulting downside.
For instance, as far as its development in Norwich is concerned, Liberty International has entered a deal with the developer to buy the scheme whenit is completed.
"It's their (the developers') obligation to complete it. They are taking the risk on construction and letting. Liberty has paid a deposit. If theyfail to meet the conditions we don't have to pay. Our downside has been protected and currently the development is letting very well."
Smith says the risks are higher for other developers and property groups wanting to develop in a higher interest-rate environment.
But he says these companies will still find it possible to fix theirloans at attractive interest rates.
